BlackRock’s Chief, Laurence Fink, Urges Other C.E.O.s to Stop Being So Nice to Investors

[ksen]

http://www.nytimes.com/2015/04/14/b...-to-stop-being-so-nice-to-investors.html?_r=0

He is planning to tell the leaders that too many of them have been trying to return money to investors through so-called shareholder-friendly steps like paying dividends and buying back stock.

To Mr. Fink, these maneuvers, often done under pressure from activist investors, are harming the long-term creation of value and may be doing companies and their investors a disservice, despite the increases in stock prices that have often been the result.

“The effects of the short-termist phenomenon are troubling both to those seeking to save for long-term goals such as retirement and for our broader economy,” Mr. Fink writes in the letter. He says that such moves were being done at the expense of investing in “innovation, skilled work forces or essential capital expenditures necessary to sustain long-term growth.”

Rather than consider the return of all this money to shareholders positively, Mr. Fink says the move “sends a discouraging message about a company’s ability to use its resources wisely and develop a coherent plan to create value over the long term.” Moreover, he argues that “with interest rates approaching zero, returning excessive amounts of capital to investors” isn’t helpful because they “will enjoy comparatively meager benefits from it in this environment.”

Personally I agree with Mr. Fink but I'm pretty sure his letter will fall on deaf ears.

 

[Axulus]

http://www.nytimes.com/2015/04/14/b...-to-stop-being-so-nice-to-investors.html?_r=0

Rather than consider the return of all this money to shareholders positively, Mr. Fink says the move “sends a discouraging message about a company’s ability to use its resources wisely and develop a coherent plan to create value over the long term.” Moreover, he argues that “with interest rates approaching zero, returning excessive amounts of capital to investors” isn’t helpful because they “will enjoy comparatively meager benefits from it in this environment.”

Personally I agree with Mr. Fink but I'm pretty sure his letter will fall on deaf ears.

If there are investments available to create long term value then why aren't these companies making them? Mr. Fink has things bassackwards - it's the lack of such investments being made, resulting in cash piling up in bank accounts and and sitting idle, that is causing activist investors to put pressure on management to pay it out our buy back stock.

 

[ksen]

Yeah, you probably know better than the CEO of BlackRock.

 

[Trausti]

Yeah, you probably know better than the CEO of BlackRock.

Ksen has a point. Rather than return profits to shareholders through dividends or buybacks, the money should be used to increase management compensation.

 

[Axulus]

Yeah, you probably know better than the CEO of BlackRock.

Argument from authority FTW!

U.S. Companies Hold Record $1.64 Trillion in Cash

http://www.bloomberg.com/news/artic...ds-u-s-companies-holding-record-1-64-trillion

If management has a plan to invest it, why don't they, you know, invest it?

 

[ksen]

Yeah, you probably know better than the CEO of BlackRock.

Ksen has a point. Rather than return profits to shareholders through dividends or buybacks, the money should be used to increase management compensation.

what do you think the dividends and buybacks are for?

 

[Rhea]

Argument from authority FTW!

U.S. Companies Hold Record $1.64 Trillion in Cash

http://www.bloomberg.com/news/artic...ds-u-s-companies-holding-record-1-64-trillion

If management has a plan to invest it, why don't they, you know, invest it?

Yeah! All the suypply siders said if we just handed them lots and lots of money through tax cuts, they'd invest it! Where's the investment that they said was a GUARANTEED outcome of the terrific tax cuts!?

 

[dismal]

Damn greedy and selfish CEOs always giving money away instead of spending it to build gloriously profitable megacorporations.

 

[bilby]

So it seems that there are three things that could happen with the cash corporations have in the bank:

1) They could invest it, but they can't find any worthwhile investments to make;
2) They can give it to their shareholders, but the shareholders can't find any worthwhile investments to make with it either; or
3) They could have paid it in taxes, but the government cut taxes.

Presumably the government simply doesn't want any more money. There is no government debt; There are no under funded government programs; and there is nobody anywhere in the country who could benefit more than the managers and stockholders of the corporations, if the money was transferred to them.

It's an unsolvable problem.

 

[Axulus]

So it seems that there are three things that could happen with the cash corporations have in the bank:

1) They could invest it, but they can't find any worthwhile investments to make;
2) They can give it to their shareholders, but the shareholders can't find any worthwhile investments to make with it either; or
3) They could have paid it in taxes, but the government cut taxes.

Presumably the government simply doesn't want any more money. There is no government debt; There are no under funded government programs; and there is nobody anywhere in the country who could benefit more than the managers and stockholders of the corporations, if the money was transferred to them.

It's an unsolvable problem.

Government increased taxes - not sure where you are getting your talking points from.

Where are you getting that "shareholders can't find any worthwhile investments to make"?

Annual Venture Capital Investment Tops $48 Billion in 2014, Reaching Highest Level in Over a Decade, According to the MoneyTree Report

http://nvca.org/pressreleases/annua...hest-level-decade-according-moneytree-report/

 

[bilby]

So it seems that there are three things that could happen with the cash corporations have in the bank:

1) They could invest it, but they can't find any worthwhile investments to make;
2) They can give it to their shareholders, but the shareholders can't find any worthwhile investments to make with it either; or
3) They could have paid it in taxes, but the government cut taxes.

Presumably the government simply doesn't want any more money. There is no government debt; There are no under funded government programs; and there is nobody anywhere in the country who could benefit more than the managers and stockholders of the corporations, if the money was transferred to them.

It's an unsolvable problem.

Government increased taxes - not sure where you are getting your talking points from.

Here..

I don't bother trying to keep up with the minutiae of the US tax code, so I have no idea whether taxes on US companies have increased or decreased overall; But the presence of a crapton of cash that companies and investors can't find a home for suggests that it would certainly do no harm to raise those taxes a little.

It's not a 'talking point'; it is a conclusion drawn from the evidence presented in this thread.

If the stuff posted in the thread so far is wrong, then you need to take that up with the people who posted it.

Where are you getting that "shareholders can't find any worthwhile investments to make"?

It is implied by this line from the OP:

he argues that “with interest rates approaching zero, returning excessive amounts of capital to investors” isn’t helpful because they “will enjoy comparatively meager benefits from it in this environment.”

 

[Axulus]

Government increased taxes - not sure where you are getting your talking points from.

Here..

I don't bother trying to keep up with the minutiae of the US tax code, so I have no idea whether taxes on US companies have increased or decreased overall; But the presence of a crapton of cash that companies and investors can't find a home for suggests that it would certainly do no harm to raise those taxes a little.

It's not a 'talking point'; it is a conclusion drawn from the evidence presented in this thread.

If the stuff posted in the thread so far is wrong, then you need to take that up with the people who posted it.

Where are you getting that "shareholders can't find any worthwhile investments to make"?

It is implied by this line from the OP:

he argues that “with interest rates approaching zero, returning excessive amounts of capital to investors” isn’t helpful because they “will enjoy comparatively meager benefits from it in this environment.”

Taxes are the highest they've been since 1986. Corporate taxes have pretty much been left alone for decades.

 

[bilby]

Here..

I don't bother trying to keep up with the minutiae of the US tax code, so I have no idea whether taxes on US companies have increased or decreased overall; But the presence of a crapton of cash that companies and investors can't find a home for suggests that it would certainly do no harm to raise those taxes a little.

It's not a 'talking point'; it is a conclusion drawn from the evidence presented in this thread.

If the stuff posted in the thread so far is wrong, then you need to take that up with the people who posted it.

Where are you getting that "shareholders can't find any worthwhile investments to make"?

It is implied by this line from the OP:

he argues that “with interest rates approaching zero, returning excessive amounts of capital to investors” isn’t helpful because they “will enjoy comparatively meager benefits from it in this environment.”

Taxes are the highest they've been since 1986. Corporate taxes have pretty much been left alone for decades.

OK.

So it seems that there are three things that could happen with the cash corporations have in the bank:

1) They could invest it, but they can't find any worthwhile investments to make;
2) They can give it to their shareholders, but the shareholders can't find any worthwhile investments to make with it either; or
3) They could have paid it in taxes, but the government didn't take it from them in taxes.

Presumably the government simply doesn't want any more money. There is no government debt; There are no under funded government programs; and there is nobody anywhere in the country who could benefit more than the managers and stockholders of the corporations, if the money was transferred to them.

It's an unsolvable problem.

 

[Axulus]

Here..

I don't bother trying to keep up with the minutiae of the US tax code, so I have no idea whether taxes on US companies have increased or decreased overall; But the presence of a crapton of cash that companies and investors can't find a home for suggests that it would certainly do no harm to raise those taxes a little.

It's not a 'talking point'; it is a conclusion drawn from the evidence presented in this thread.

If the stuff posted in the thread so far is wrong, then you need to take that up with the people who posted it.

Where are you getting that "shareholders can't find any worthwhile investments to make"?

It is implied by this line from the OP:

he argues that “with interest rates approaching zero, returning excessive amounts of capital to investors” isn’t helpful because they “will enjoy comparatively meager benefits from it in this environment.”

Taxes are the highest they've been since 1986. Corporate taxes have pretty much been left alone for decades.

OK.

So it seems that there are three things that could happen with the cash corporations have in the bank:

1) They could invest it, but they can't find any worthwhile investments to make;
2) They can give it to their shareholders, but the shareholders can't find any worthwhile investments to make with it either; or
3) They could have paid it in taxes, but the government didn't take it from them in taxes.

Presumably the government simply doesn't want any more money. There is no government debt; There are no under funded government programs; and there is nobody anywhere in the country who could benefit more than the managers and stockholders of the corporations, if the money was transferred to them.

It's an unsolvable problem.

As my charts demonstrated, shareholders are finding other investments - fixed non-residential investment continues to reach new highs and venture capital investment is the highest in a decade.

 

[bilby]

Here..

I don't bother trying to keep up with the minutiae of the US tax code, so I have no idea whether taxes on US companies have increased or decreased overall; But the presence of a crapton of cash that companies and investors can't find a home for suggests that it would certainly do no harm to raise those taxes a little.

It's not a 'talking point'; it is a conclusion drawn from the evidence presented in this thread.

If the stuff posted in the thread so far is wrong, then you need to take that up with the people who posted it.

Where are you getting that "shareholders can't find any worthwhile investments to make"?

It is implied by this line from the OP:

he argues that “with interest rates approaching zero, returning excessive amounts of capital to investors” isn’t helpful because they “will enjoy comparatively meager benefits from it in this environment.”

Taxes are the highest they've been since 1986. Corporate taxes have pretty much been left alone for decades.

OK.

So it seems that there are three things that could happen with the cash corporations have in the bank:

1) They could invest it, but they can't find any worthwhile investments to make;
2) They can give it to their shareholders, but the shareholders can't find any worthwhile investments to make with it either; or
3) They could have paid it in taxes, but the government didn't take it from them in taxes.

Presumably the government simply doesn't want any more money. There is no government debt; There are no under funded government programs; and there is nobody anywhere in the country who could benefit more than the managers and stockholders of the corporations, if the money was transferred to them.

It's an unsolvable problem.

As my charts demonstrated, shareholders are finding other investments - fixed non-residential investment continues to reach new highs and venture capital investment is the highest in a decade.

And yet companies are swimming in cash, and Laurence Fink reckons giving it to shareholders is a poor plan because they have nowhere to invest it that will produce good returns in the current economic climate.

Something doesn't add up.

 

[dismal]

Here..

I don't bother trying to keep up with the minutiae of the US tax code, so I have no idea whether taxes on US companies have increased or decreased overall; But the presence of a crapton of cash that companies and investors can't find a home for suggests that it would certainly do no harm to raise those taxes a little.

It's not a 'talking point'; it is a conclusion drawn from the evidence presented in this thread.

If the stuff posted in the thread so far is wrong, then you need to take that up with the people who posted it.

Where are you getting that "shareholders can't find any worthwhile investments to make"?

It is implied by this line from the OP:

he argues that “with interest rates approaching zero, returning excessive amounts of capital to investors” isn’t helpful because they “will enjoy comparatively meager benefits from it in this environment.”

Taxes are the highest they've been since 1986. Corporate taxes have pretty much been left alone for decades.

OK.

So it seems that there are three things that could happen with the cash corporations have in the bank:

1) They could invest it, but they can't find any worthwhile investments to make;
2) They can give it to their shareholders, but the shareholders can't find any worthwhile investments to make with it either; or
3) They could have paid it in taxes, but the government didn't take it from them in taxes.

Presumably the government simply doesn't want any more money. There is no government debt; There are no under funded government programs; and there is nobody anywhere in the country who could benefit more than the managers and stockholders of the corporations, if the money was transferred to them.

It's an unsolvable problem.

As my charts demonstrated, shareholders are finding other investments - fixed non-residential investment continues to reach new highs and venture capital investment is the highest in a decade.

And yet companies are swimming in cash, and Laurence Fink reckons giving it to shareholders is a poor plan because they have nowhere to invest it that will produce good returns in the current economic climate.

Something doesn't add up.

Hint: it's the presumption that it's the job of the CEO of Company A to manage the entire investment climate for you. It's the job of the CEO of Company A to either find good internal uses for the cash or return it to the shareholders.

 

[bilby]

Here..

I don't bother trying to keep up with the minutiae of the US tax code, so I have no idea whether taxes on US companies have increased or decreased overall; But the presence of a crapton of cash that companies and investors can't find a home for suggests that it would certainly do no harm to raise those taxes a little.

It's not a 'talking point'; it is a conclusion drawn from the evidence presented in this thread.

If the stuff posted in the thread so far is wrong, then you need to take that up with the people who posted it.

Where are you getting that "shareholders can't find any worthwhile investments to make"?

It is implied by this line from the OP:

he argues that “with interest rates approaching zero, returning excessive amounts of capital to investors” isn’t helpful because they “will enjoy comparatively meager benefits from it in this environment.”

Taxes are the highest they've been since 1986. Corporate taxes have pretty much been left alone for decades.

OK.

So it seems that there are three things that could happen with the cash corporations have in the bank:

1) They could invest it, but they can't find any worthwhile investments to make;
2) They can give it to their shareholders, but the shareholders can't find any worthwhile investments to make with it either; or
3) They could have paid it in taxes, but the government didn't take it from them in taxes.

Presumably the government simply doesn't want any more money. There is no government debt; There are no under funded government programs; and there is nobody anywhere in the country who could benefit more than the managers and stockholders of the corporations, if the money was transferred to them.

It's an unsolvable problem.

As my charts demonstrated, shareholders are finding other investments - fixed non-residential investment continues to reach new highs and venture capital investment is the highest in a decade.

And yet companies are swimming in cash, and Laurence Fink reckons giving it to shareholders is a poor plan because they have nowhere to invest it that will produce good returns in the current economic climate.

Something doesn't add up.

Hint: it's the presumption that it's the job of the CEO of Company A to manage the entire investment climate for you. It's the job of the CEO of Company A to either find good internal uses for the cash or return it to the shareholders.

Ah, I see. So you are saying that Laurence Fink is just an idiot who doesn't understand what his job is.

Thanks for clearing that up.

 

[Togo]

Here..

I don't bother trying to keep up with the minutiae of the US tax code, so I have no idea whether taxes on US companies have increased or decreased overall; But the presence of a crapton of cash that companies and investors can't find a home for suggests that it would certainly do no harm to raise those taxes a little.

It's not a 'talking point'; it is a conclusion drawn from the evidence presented in this thread.

If the stuff posted in the thread so far is wrong, then you need to take that up with the people who posted it.

Where are you getting that "shareholders can't find any worthwhile investments to make"?

It is implied by this line from the OP:

he argues that “with interest rates approaching zero, returning excessive amounts of capital to investors” isn’t helpful because they “will enjoy comparatively meager benefits from it in this environment.”

Taxes are the highest they've been since 1986. Corporate taxes have pretty much been left alone for decades.

OK.

So it seems that there are three things that could happen with the cash corporations have in the bank:

1) They could invest it, but they can't find any worthwhile investments to make;
2) They can give it to their shareholders, but the shareholders can't find any worthwhile investments to make with it either; or
3) They could have paid it in taxes, but the government didn't take it from them in taxes.

Presumably the government simply doesn't want any more money. There is no government debt; There are no under funded government programs; and there is nobody anywhere in the country who could benefit more than the managers and stockholders of the corporations, if the money was transferred to them.

It's an unsolvable problem.

As my charts demonstrated, shareholders are finding other investments - fixed non-residential investment continues to reach new highs and venture capital investment is the highest in a decade.

Uh.. I don't get that from the chart. The chart is for venture capital only. Venture capital is a tiny part of the overall corporate market, and generally deals with firms that don't have shareholders, or if they do, have shareholders that don't expect their reward to be in the form of dividends.

What the Blackrock CEO is talking about it is businesses investing in their own business - training staff, building/upgrading plant or infrastructure, launching new projects, and so on. They're just making profits and giving them to shareholders, which isn't in the best interests of either the shareholders or the companies involved.

The chart may even illustrate part of the problem, where Venture capital firms have increasing pools of capital to work with precisely because it's hard to find any corporate that's willing to invest, rather than chase yield. Thus if you want anything other than short-term yield, you need to hire professionals to find that opportunity for you.

 

[ksen]

Hint: it's the presumption that it's the job of the CEO of Company A to manage the entire investment climate for you. It's the job of the CEO of Company A to either find good internal uses for the cash or return it to the shareholders.

What do you mean "return it to investors?"

That implies the cash came from the investors and that they have some claim on that cash.

It didn't and they don't.

 

[dismal]

Ah, I see. So you are saying that Laurence Fink is just an idiot who doesn't understand what his job is.

Thanks for clearing that up.

I don't know why he said what he did. Idiot is one possible explanation.